The company is experiencing intense competition that is forcing the company to reduce the selling price of its Sport Model drones in order to remain competitive. Both the companys Controller and VP of Operations have stated that the direct costs of its products, such as direct materials and direct labor, cannot be reduced. The Chief Financial Officer (CFO) has requested an analysis based on the most recent financial statements generated using actual costs, but restated based on estimated future selling prices. This forecasted future profitability should include an analysis of each business segment via ABC Costing Matrix Algebra.

Thermal Rising Q1. If the company can NOT eliminate any Indirect Cost, yet Drops the Novice Level Online Sales with NO change in units sold for other business segments, compute the financial advantage or disadvantage. Enter advantage as a positive number; disadvantage as a negative number. Q2: If the business segment Novice Level Online Sales is dropped, these actions are possible. (a) The company would terminate a part-time Graphics Designer, saving $20,000 in Graphics Design Salaries. (b) The Controller identifies that $5,000 in Accounting Salaries can be saved by eliminating Overtime work in the Controller's Department. (c) The VP of Marketing has indicated that rental equipment costing $5,000 per fiscal period can be taken offline. However, the rental contract prevents returning the equipment for the next two years. (d) The VP of Marketing indicates that 10% of Marketing Salaries and Commissions are for commissions for Online Sales of the Novice Model and thus would be avoided if the business segment is dropped. (e) The CIO (Chief Information Systems Officer) indicates that new computer equipment has come online allowing the company to terminate a contract for renting equipment that costs $8,000 per year if the business segment is dropped. (f) The CEO reviewed Administrative Expenses and will order steep cuts in discretionary expenses, such as travel, advertising, etc., totaling $20,000 beginning next fiscal period, if the business segment is dropped Compute the Total Avoidable Costs (Total Reduction in Indirect Costs). Enter the total avoidable costs as a positive number. Q3. Compute the financial advantage (disadvantage) if the business segment Novice Level Online Sales is dropped and the actions stated above are implemented. Enter advantage as a positive number; disadvantage as a negative number. Q4. If the Company Drops the Novice Level Online Sales with NO change in units sold for other business segments, what is the minimum reduction in Indirect Costs that justifies dropping the business segment? Enter the reduction as a positive number